AIG exec alumnus David Herzog speaks to MU

AIG exec alumnus David Herzog speaks to MU

By Pierce Courchaine

Published Oct. 23, 2009

The MU School of Business hosted David Herzog, chief financial officer of the American International Group on Thursday as part of the Distinguished Alumni Lecture series. Herzog spoke about the nation's economy and the bailout of AIG.

"There was no one single cause for the financial crisis," Herzog said. "The world is connected and when it works, it works well. When it doesn't work, it really slows down in a hurry. That's what we saw last year, a severe and rapid decline."

Herzog received a bachelor's degree in accountancy from MU in 1982.

AIG, one the world's largest insurers, received $85 billion in bailout money in September 2008. Herzog was appointed CFO in October 2008.

"The Federal Reserve is extraordinary diligent in overseeing of cash flow in the company," Herzog said. "They are an 80 percent owner and I treat them like an 80 percent owner."

Hours before the lecture Thursday, the Federal Reserve announced severe pay cuts to 136 executives at several of the largest bailed out companies, including AIG, and put forth a plan to limit executive pay in the future.

"Compensation practices at some banking organizations have led to misaligned incentives and excessive risk-taking, contributing to bank losses and financial instability," Federal Reserve Chairman Ben Bernanke said in a news release.

Herzog said AIG received funds because if the company were not bailed out, the public would be hurt even more.

Not everyone agrees with the bailout of AIG, but some feel it was necessary," freshman Sam Morrison said. "I don't think there are any companies that are too big to fail. At the same time, I think that the welfare of the people needs to be protected."

Freshman Connor Downes, an international business major, said he doesn't agree with what AIG did with the bailout money.

"The economy sucks," Downes said. "The recession seems to be on the tail end, but the jobs are still not there. Hopefully, four years from now, it will be fixed. But, I'm a little worried I won't get a job."

Herzog said despite the bailout he did not regret the road AIG took.

"I am not someone that looks in the mirror and ponders 'coulda, shoulda, woulda,’ " Herzog said. "We think we have made what are the best business decisions under the circumstances."

Remaining optimistic about the future, he said AIG would prove its worth.

"I've always been a glass half full kind of guy," Herzog said. "I love what I do. I get the privilege, the benefit and the honor to work with a great company. It's had some issues and we are dealing with those issues. We were granted a great deal of financial support and trust from the government and we are working hard to be worthy of that trust and that investment."

The future looks bright for students as well, Morrison said.

"I'm cautiously optimistic, now that the economy is so low, it has made the environment more competitive," he said. "There is money to be made, there has got to be someone to make it."